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On May 12, the Prime Minister, Mr. Narendra Modi, Financial Companies (NBFCs). Borrowers with
announced a special economic package of Rs 20 lakh up to Rs 25 crore outstanding and Rs 100 crore
crore (equivalent to 10% of India’s GDP) with the turnover will be eligible for such loans and can
aim of making the country independent against the avail the scheme till October 31, 2020. Interest
tough competition in the global supply chain and to on the loan will be capped and 100% credit
help in empowering the poor, labourers, migrants guarantee on principal and interest will be given
who have been adversely affected by COVID. to banks and NBFCs.
Following this announcement, the Finance Minister,
Corpus for MSMEs: A fund of funds with a
Ms. Nirmala Sitharaman, through five press
corpus of Rs 10,000 crore will be set up for
conferences, announced the detailed measures under
MSMEs. This will provide equity funding for
the economic package. This note summarises the key
MSMEs with growth potential and viability. Rs
measures proposed under the economic package.
50,000 crore is expected to be leveraged through
Government Reforms this fund structure.1
months (June, July and August). This is debentures, NCDs cannot be converted into
estimated to provide liquidity relief of Rs 2,500 equity shares of the issuing company at a future
crore to businesses and workers. date.3
Statutory PF contribution: Statutory PF Legislative Highlights
contribution of both the employer and employee
Definition of MSME: The definition of MSMEs
will be reduced from 12% to 10% each for all
will be changed by amending the Micro, Small
establishments covered by EPFO for next three
and Medium Enterprises Development Act,
months. This scheme will apply to workers who
2006. As per the proposed definition, the
are not eligible for the 24% EPF support under
investment limit will be increased from Rs 25
PM Garib Kalyan Package and its extension.
lakh to Rs 1 crore for micro enterprises, from Rs
However, Central Public Sector Enterprises
5 crore to Rs 10 crore for small enterprises, and
(CPSEs) and State Public Sector Units (PSUs)
from Rs 10 crore to Rs 20 crore for medium
will continue to contribute 12% as employer
enterprises. A new criteria of annual turnover
contribution.1
will be introduced. The turnover limit for Micro,
Street vendors: A special scheme will be Small and Medium enterprises will be Rs 5
launched within a month to facilitate easy access crore, Rs 50 crore, and Rs 100 crore,
to credit for street vendors. Under this scheme, respectively. The current distinction between
bank credit will be provided to each vendor for manufacturing and services MSMEs (to provide
an initial working capital of up to Rs 10,000. different investment limits for each category)
This is estimated to generate liquidity of Rs will be removed.1
5,000 crore.2
Initiation of insolvency proceedings: The
Policy Highlights Insolvency and Bankruptcy Code, 2016 will be
amended to provide for the following: (i)
Expediting payment of dues to MSMEs:
minimum threshold to initiate insolvency
Payments due to MSMEs from the government
proceedings will be increased from one lakh
and CPSEs will be released within 45 days.1
rupees to one crore rupees; (ii) suspension of
Insolvency resolution: A special insolvency fresh initiation of insolvency proceedings up to
resolution framework for MSMEs under the one year, depending upon the pandemic
Insolvency and Bankruptcy Code, 2016 will be situation; (iii) COVID-19 related debt will be
notified. excluded from the definition of ‘default’ under
the Code for triggering insolvency proceedings.3
Disallowing global tenders: To protect Indian
MSMEs from competition from foreign Amendments to Companies Act, 2013: The
companies, global tenders of up to Rs 200 crore Companies Act, 2013 will be amended to
will not be allowed in government procurement provide for the following:3
tenders.1
i. Certain offences under the Companies Act,
Reduction in TDS and TCS rates: The rates of 2013 will be decriminalised. These include
Tax Deduction at Source (TDS) for the non- minor technical and procedural defaults such
salaried specified payments made to residents as shortcomings in CSR reporting,
and Tax Collected at Source (TCS) will be inadequacies in Board report, filing defaults,
reduced by 25% from the existing rates. This delay in holding of AGM. Several
reduction will apply from May 14, 2020 to compoundable offences will be shifted to
March 31, 2021. This is estimated to provide internal adjudication mechanism.3
liquidity of Rs 50,000 crore.1
ii. Currently, certain provisions from the
Ease of doing business for corporates: Direct Companies Act, 1956 continue to apply to
listing of securities by Indian public companies producer companies. These provisions will be
in permissible foreign jurisdictions will be included in Companies Act, 2013. The
allowed. Private companies which list Non- National Company Law Appellate Tribunal
Convertible Debentures (NCDs) on stock (NCLAT) will be granted powers to create
exchanges will not be considered listed additional/specialised benches. All defaults
companies. NCDs are debt instruments with a by small companies, one-person companies,
fixed tenure issued by companies to raise money producer companies, and start-ups will be
for business purposes. Unlike convertible subject to lower penalties.
different states which could be used by discoms districts and block levels for efficient
of the respective states as liquidity. management of the pandemic. The National
Digital Health Blueprint will be implemented,
Privatisation of power distribution: Power
which aims at creating an ecosystem to support
departments/utilities in union territories will be
universal health coverage in an efficient,
privatised.5
inclusive, safe and timely manner using digital
Commercial coal mining: In March 2020, the technology.
Mineral Laws (Amendment) Bill was passed,
which opened up the coal sector for commercial
Allocation for MGNREGS: To help boost rural
economy, an additional Rs 40,000 crore will be
mining. Auctions will be conducted for
allocated under MGNREGS. This increases the
allocation of coal mines. Any party can bid for a
Union Budget allocation for MGNREGS from
coal block and sell in the open market. Entry
Rs 61,500 crore to Rs 1,01,500 crore (65%
norms will be liberalised and nearly 50 blocks
increase) for 2020-21.5
will be offered immediately.5
Viability Gap Funding: Viability Gap Funding
Legislative Highlights
(VGF) for social infrastructure projects will be
Reduction in cross-subsidy: The Electricity increased by up to 30% of the total project cost.
Act, 2003 will be amended to ensure a The total expense for developing the social
progressive reduction in cross-subsidies in the infrastructure is estimated be Rs 8,100 crore.5
sector.5 Direct Benefit Transfer (DBT) is being
Technology driven education: PM eVidya will
planned for providing subsidy to eligible
be launched for multi-mode access to
consumers.5
digital/online education. This program will
Housing include facilities to support school education in
states/UTs under the DIKSHA scheme (one
Financial Highlights nation, one digital platform). National
Credit Linked Subsidy Scheme for Middle Foundational Literacy and Numeracy Mission
Income Group (MIG): The Credit Linked will be launched by December 2020 to ensure
Subsidy Scheme for Middle Income Group that every child attains learning level and
(annual income between Rs 6 lakh and Rs 18 outcomes in grade 5 by 2025.3
lakh) will be extended by one year up to March
Key Measures Taken by Reserve Bank of
2021. The government has estimated that this
will lead to an investment of over Rs 70,000 India (RBI)1
crore in the housing sector.2 The overall financial package that has been
Policy Highlights announced also includes the liquidity generated by
measures announced by RBI. Some of these
Support to real estate sector: COVID 19 will measures include:
be treated as an event of “Force Majeure” under
Real Estate Regulatory Authority (RERA) by Cash Reserve Ratio (CRR) was reduced which
states/union territories and their Regulatory resulted in liquidity support of Rs 1,37,000 crore.
Authorities. An extension of six months will be Banks’ limits for borrowing under the marginal
given on registration and completion dates of all standing facility (MSF) were increased. This
registered projects expiring on or after March 25, allowed banks to avail additional Rs 1,37,000
2020 without individual applications, which can crore of liquidity at reduced MSF rate.
be further increased by three more months at the
discretion of the Regulatory Authorities. Partial Total Rs 1,50,050 crore of Targeted Long Term
bank guarantees will also be released by Repo Operations (TLTRO) has been planned for
government agencies to ease cash flows.1 investment in investment grade bonds,
commercial paper, non-convertible debentures
Social Sector including those of NBFCs and MFIs.
Policy Highlights Special Liquidity Facility (SLF) of Rs 50,000
crore was announced for mutual funds to provide
Public health: The investment in public health liquidity support.
will be increased along with investment in grass
root health institutions of urban and rural areas.3
The lab networks are being strengthened in
May 20, 2020 -5-
Summary of announcements: Aatma Nirbhar Bharat Abhiyaan PRS Legislative Research
Special refinance facilities worth Rs 50,000 crore Break-up of the Aatma Nirbhar Bharat
were announced for NABARD, SIDBI and NHB Abhiyaan economy package
at policy repo rate.
The table below shows measure components of the
A moratorium of three months has been provided entire special economic package:
on payment of installments and interest on
working capital facilities for all types of loans. Table 1: Break-up of stimulus from Aatma
Nirbhar Bharat Abhiyaan package
Item Amount (in Rs crore)
Stimulus from earlier measures 1,92,800
Stimulus provided by 5,94,550
announcements in Part 1
Stimulus provided by 3,10,000
announcements in Part 2
Stimulus provided by 1,50,000
announcements in Part 3
Stimulus provided by 48,100
announcements in Part 4 and Part 5
Sub Total 1,295,400
RBI Measures (Actual) 8,01,603
Grand Total 20,97,053
Source: Presentation made by Union Finance & Corporate Affairs
Minister Smt. Nirmala Sitharaman under Aatmanirbhar Bharat
Abhiyaan to support Indian economy in fight against COVID-19,
Ministry of Finance, May 13, 2020, PRS.
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Presentation made by Union Finance & Corporate Affairs in fight against COVID-19, May 16, 2020,
Minister Smt. Nirmala Sitharaman under Aatmanirbhar Bharat https://static.pib.gov.in/WriteReadData/userfiles/AatmaNirbhar%2
Abhiyaan to support Indian economy in fight against COVID-19, 0Bharat%20Full%20Presentation%20Part%204%2016-5-2020.pdf.
Ministry of Finance, May 13, 2020, 5
Presentation of details of 5th Tranche announced by Union
https://static.pib.gov.in/WriteReadData/userfiles/Aatmanirbhar%2 Finance & Corporate Affairs Minister Smt. Nirmala Sitharaman
0Presentation%20Part- under Aatmanirbhar Bharat Abhiyaan to support Indian economy
1%20Business%20including%20MSMEs%2013-5-2020.pdf. in fight against COVID-19, May 17, 2020,
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Presentation of details of Tranche 2 by Union Finance & https://static.pib.gov.in/WriteReadData/userfiles/Aatma%20Nirbha
Corporate Affairs Minister Smt. Nirmala Sitharaman under r%20Bharat%20%20Presentation%20Part%205%2017-5-
Aatmanirbhar Bharat Abhiyaan to support Indian economy in fight 2020.pdf.
against COVID-19, Ministry of Finance, May 14, 2020,
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